Buenos Aires Forum 2009

Miguel Kiguel and Carlos Pagni Discuss Economic and Political Outlook for Argentina at EMTA’s Second Forum in Buenos Aires  

Banco Itaú Unibanco played host to EMTA’s Second Annual Forum in Buenos Aires on May 13, 2009. The event, which was conducted in Spanish, attracted over 150 market participants, with speakers’ comments largely off-the-record.

EMTA Board Director Rodolfo Fischer (Banco Itaú Unibanco) welcomed the audience with a recap of the impromptu audience poll taken at the 2008 EMTA Forum in Buenos Aires. Fischer highlighted the accuracy of the audience’s average forecast of 2008 GDP growth of 7% for Argentina; while acknowledging the excessive optimism in its prediction of 2009 GDP growth of 4%. He added that the average forecast for 2008 inflation of 27% was above actual inflation of 20.5%; and that the 2009 inflation prediction of 24% also appeared to be out of line due to the unforeseen economic developments of 2008 and 2009.

Following Fischer’s introductory comments, Fernando Ferrari of Banco Itaú Unibanco moderated a panel discussion featuring Ricardo Maxit (Galileo), Pablo Goldberg (HSBC Securities USA), Juan Veron (HSBC Global Markets) and Josefina Pizarro (TPCG). The panel discussed whether the market had yet reached bottom, whether there was a deeper Latin-American economic crisis yet to come, the likely path of a recovery, interest rate issues and whether the time had come to build positions. Speakers addressed which securities were likely to rebound most dramatically, and touched on FX, equities, local instruments and both sovereign and corporate external debt. In addition, the panelists examined the Argentine corporate sector noting significant positives in the sector. The panelists finished with a description of their favorite Latin American trades for 2009.

Miguel Kiguel (Econviews), who had served as Argentina’s Undersecretary of Finance from 1996-99, delivered a keynote presentation discussing in depth both the global economic outlook and that of Argentina specifically. Kiguel discussed the current global malaise, noting it had exceeded the most pessimistic predictions. Kiguel put the crisis in historical context by noting that during the Great Depression, the Dow fell 90% compared with the 45% decline this cycle. Much has been accomplished by lowered interest rates, concerted action by Central Banks and new roles undertaken by the multilateral organizations, although the credit crunch must continue to be addressed and this will take time and he praised the unprecedented international coordination efforts to address the crisis that had taken place among financial institutions and regulators. Financial recovery can only take place once there is financial stability around the globe, Kiguel stressed. Kiguel predicted that the recovery curve will look like “a J in the mirror”.

 Turning specifically to Argentina, Kiguel argued that while the market appeared to be pricing in another default—and he conceded that avoiding an economic crisis á la 2001 would not be easy—this could be avoided as the debt to GDP ratio was only 34%, with a large percentage of debt in local currency. However, he added that, unlike others, the Argentine government did not have the economic resources to stimulate the economy in order to promote a recovery and thus must somehow trigger a change in investor confidence, for which there was no easy recipe.

Click Here for Miguel Kiguel’s presentation.

Leading political columnist Carlos Pagni of La Nacion also delivered a keynote speech discussing Argentina’s political future, and focused specifically on the upcoming June 28 congressional elections. Pagni discussed whether the vote would mark the end of the current political cycle or augur the start of a more prolonged governmental crisis. He reviewed the possible outcomes in Argentina’s main provinces and speculated on how the government would react to various election results.

Closing the event, Ferrari asked attendees to once again submit predictions for several economic variables for the next 2 years. Results showed that Forum attendees expect a 2009 Argentine GDP drop of 2.2%, inflation at 15.5%, an ARP/USD FX rate of 4.18 with Badlar at 15.22%. In 2010, attendees expect Argentine GDP to return to a positive 0.73%, with inflation at 14.86%, 4.78 pesos per dollar and the Badlar at 16.62%.